Prosecutors Indict Samsung's Lee Jae-yong, Choi Ji-sung, Lee Young-ho, Kim Tae-han and 7 Others on Charges of Violating Capital Markets Act and External Audit Act

Investigation Concluded After 1 Year and 9 Months
First Case Not Following Prosecution Investigation Deliberation Committee's Recommendation

Vice Chairman Lee Jae-yong of Samsung Electronics, former Samsung Future Strategy Office Chief Choi Ji-sung, former Samsung C&T Chief Financial Officer Lee Young-ho./Photo by Kang Jin-hyung, Yonhap News Agency

[Asia Economy Reporter Choi Seok-jin] The prosecution, which has been investigating allegations surrounding the merger between Samsung C&T and Cheil Industries, collectively indicted Vice Chairman Lee Jae-yong of Samsung Electronics and other related parties on the 1st, concluding a 1 year and 9 months long investigation.

Despite receiving a recommendation from the Prosecution Investigation Deliberation Committee, composed of external experts, to 'halt the investigation and not prosecute' Vice Chairman Lee, the prosecution conducted additional investigations for over two months and ultimately indicted Lee and others, marking the first case of disregarding the committee's recommendation.

However, as opinions among accounting experts remain divided regarding the legality of Samsung BioLogics' accounting treatment, a fierce legal battle between the prosecution and Samsung is expected during the trial process.

The Economic Crime Criminal Division of the Seoul Central District Prosecutors' Office (Chief Prosecutor Lee Bok-hyun) on the same day indicted about 10 current and former executives, including Vice Chairman Lee, former head of Samsung Future Strategy Office Choi Ji-sung (Vice Chairman), former Deputy General Manager Jang Chung-gi (President), former Strategy Team Leader Kim Jong-jung (President), and Samsung BioLogics CEO Kim Tae-han, on charges of violating the Capital Markets Act (fraudulent trading and market manipulation), violating the External Audit Act (breach of accounting standards, preparation and disclosure of false financial statements), and breach of fiduciary duty, among others, without detention.

The indictment also included former Samsung C&T representatives Choi Chi-hoon and Kim Shin, as well as former Chief Financial Officer Lee Young-ho (currently Samsung C&T CEO).

Additional perjury charges related to the National Pension Service corruption trial were added against former Team Leader Kim Jong-jung and former CEO Kim Shin.

The prosecution stated, "We confirmed various illegal acts such as organized fraudulent trading, market manipulation, and breach of fiduciary duty by Samsung Group during the merger of Cheil Industries into Samsung C&T, executed as part of the succession process."

Regarding the background of not accepting the deliberation committee's opinion, the prosecution explained, "After the committee's recommendation for non-prosecution, the investigation team listened to various opinions, including critical views from external experts in law, finance, economics, and accounting, and thoroughly re-examined the investigation details, legal principles, and case handling direction. As a result, considering the majority stance in academia and precedents, the clarity of the facts proven by evidence, the seriousness and punishability of the matter, the need to resolve public suspicion through judicial judgment, and the review results of the chief prosecutors' meeting composed of investigation experts, we proceeded to indict the main responsible parties."

The maintenance of the prosecution against Vice Chairman Lee and others is expected to be led by Chief Prosecutor Kim Young-chul, who previously participated in the Samsung investigation, at the newly established Special Trial Team 2 of the Seoul Central District Prosecutors' Office, created in the personnel reshuffle by the Ministry of Justice on the 27th of last month.

After the People's Solidarity for Participatory Democracy and the Financial Supervisory Service filed complaints against Samsung BioLogics for accounting fraud in 2018, the prosecution began investigations in December of the same year by conducting raids on Samsung C&T and others.

During the investigation, the prosecution requested arrest warrants twice for CEO Kim and once for Vice Chairman Lee, but all were dismissed.

At the Prosecution Investigation Deliberation Committee held on June 27, an overwhelming majority recommended 'halting the investigation' against Vice Chairman Lee and 'non-prosecution' of all related parties. However, the prosecution summoned accounting experts for further investigation, supplementing the investigation team's existing arguments, and conducted additional investigations for over two months to create grounds for not accepting the committee's recommendation.

Having followed the committee's recommendations in eight previous cases, the prosecution's refusal to accept this recommendation, which contradicts the investigation team's position, has drawn criticism for rendering the self-introduced system to prevent the abuse of prosecutorial monopoly on indictments ineffective.

This content was produced with the assistance of AI translation services.